Google says more than 15,600 exchanged options

JohnLetzing

SAN FRANCISCO (MarketWatch) -- Google Inc. said Tuesday that more than 15,600 employees exchanged options to buy roughly 7.6 million company shares as part of an unusual program aimed at retaining the Internet giant's top talent even as its share price skids lower.

Google
GOOG, -3.16%
announced in January it would allow employees with stock options that have lost value thanks to the company's falling share price to exchange them for new options with a lower strike price.

At the time, Google executives estimated that roughly 85% of company employees had options that were "underwater," or attached to a higher stock price that rendered them virtually worthless.

For example, barring the one-for-one exchange, an employee granted stock options last summer when Google was trading at nearly $600 would have to wait until the company's shares rebound past that level in order to sell them on the open market and see a profit.

However, the exchange program has raised some concern that it effectively short-changes outside investors who may have bought Google shares in better days, and must now wait for a significant uptick in the company's share price to realize any gain.

Google has estimated it will see a modification charge of $460 million over the vesting periods of the new employee options, which range from six months to roughly five years.

The strike price for the newly-distributed options is $308.57, Google said in a regulatory filing. Google shares closed Tuesday at $308.17.

Google said that as of Monday morning, it accepted cancellation options from 15,642 employees, representing roughly 92.7% of the shares eligible for the exchange.

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